Airlines: The outlook for airlines has improved dramatically. After three loss-making years, the airline industry may break even in 2023 – earlier than expected. According to the International Air Transport Association (IATA), total revenue is expected to rise +9.7% y/y in 2023 to USD803bn (vs USD838bn in 2019), and net profits could to jump up to USD9.8bn (vs USD26.4bn in 2019), with North American carriers recording the strongest results, despite the fact that an increase in pilot salaries has been agreed after months of negotiation.
In terms of volume, all regions have seen improved passenger load factors throughout 2023, approaching pre-pandemic levels. With the reopening of China, Asia-Pacific carriers doubled their international passenger traffic over 2023, but the level remains below that of 2019. The US market still boasts strong results, with RPKs above the pre-covid level. RPKs of European carriers also improved a lot. However, airlines in this region have been facing strikes and exceptional weather conditions that caused traffic disruptions at some airports.
With regard to decarbonization, the SAF market remains in its early stages of development, which means low supply and a very high price. To achieve a significant increase in SAF production, cooperation between the government and key players in the industry is essential.
Maritime: As recession fears persist, the expectations for trade growth in the coming quarters have declined. For 2023, we expect an almost flat performance for global trade (-0.7% y/y in volume terms compared to growth of +10.6% in 2021 and +3.9% in 2022). The observed decline in demand for goods has eased port congestion worldwide, which has also dissolved bottlenecks in supply chains. As a result, prices in the ocean freight market have been falling progressively towards pre-pandemic levels (USD1,450/forty-foot box on average between 2017-2019), after reaching a never-before-seen peak in September 2021 (USD10,377/forty-foot box). For reference, revenues in this industry soared by around +58% and +29% y/y, respectively, in 2021 and 2022. Conversely, for 2023 and 2024, revenues are forecasted to decline by -31% and -4% y/y. Despite this decline, we think companies still have strong balance sheets and liquidity that will enable them to pursue M&A activity and increase investments. Capex in this industry grew by +80% in 2021 and by +15% in 2022. In 2023 and 2024, it is expected to grow by +18% and +5%, respectively. In relative terms, the capex ratio (capex to revenue) is expected to double in the coming two years, moving from an industry average of 6-7% before the pandemic to around 11-12% in 2023-24.
Rail: Europe is one of the regions where rail transportation is most developed, given the small size of the continent (reduced distances between cities/countries), the flexibility for crossing borders within the Schengen Area and the capital investments made by governments to install an extensive railway network. In Europe, this sector has historically been state-owned, with each country having its own rail-transportation company that ensures mobility through the entire territory. For this, each country is in charge of investing the necessary amount for the expansion and renovation of railway networks, as well as for the purchase of rolling stock. In the same way, governments can fix prices, which creates a certain monopoly within each country. Nevertheless, since 2021, an EU “rail-market liberalization” project has been implemented, which aims to liberalize the commercial long-distance rail market to encourage competition between operators and therefore improve services. Other countries such as the US, China, India and Japan also rely on rail transportation. However, in these countries, trains are more used for the transport of merchandise (cargo) than for passenger transportation.
Road: The 2020-2021 health crisis halted government investment in roads and infrastructure in many geographies, especially in developing regions such as Asia, Latam, and Africa, where it is precisely the lack of transport infrastructure investment that has been inhibiting growth. In contrast, in developed regions such as Europe and the US, governments have implemented new infrastructure projects during the crisis, aiming to drive economic and employment growth. For instance, the European Commission has been working on a Trans-European Transport Network (for railways and roads), aiming to connect 424 cities and imposing a minimum speed of 160km/h. The network is planned to be fully completed by 2040. For companies running inter-city buses and coaches, one of the main challenges is to be able to transform their fleets towards electric vehicles, which is relatively easier to finance in Europe than in any other region of the world. But before fully switching away from diesel, the region requires more electric charging station, both on highways and in cities.